NEW DELHI: In a major development having implications for the corporate sector, theSupreme Court on Thursday cancelled the 122 2G spectrum licences granted by former telecom minister A Raja on the ground that they were issued in a "totally arbitrary and unconstitutional" manner.

Imposing a fine of Rs five crore each on three telecom companies, which offloaded their shares after getting the licenses, the court directed regulator Telecom Regulatory Authority of India (TRAI) to make fresh recommendations on allocation of 2G licences.

Asking the government to take steps on the recommendations of TRAI within a month, a bench comprising justices G S Singhvi and A K Ganguly said the allocation of spectrum will be done through the policy of auction within four months.

The order came on petitions filed by NGO CPIL and Janata Party president Subramanian Swamy alleging scam in the allocation of spectrum licences by Raja in January, 2008 during the tenure of UPA-I government, on which the CAG had assumed the presumptive loss of upto Rs 1.76 lakhs.

The 122 licences were given by Raja for over Rs 9,000 crore, while 3G auctions for a smaller number of licences had fetched the government a sum of Rs 69,000 crores.

The companies that are set to lose on account of the cancellation of the licences are Uninor (joint venture between Unitech and Telenor of Norway), Loop Telecom, Sistema Shyam (joint venture between Shyam and Sistema of Russia), Etisalat DB (joint venture between Swan and Etisalat ofUAE), S Tel, Videocon, Tatas and Idea.

Reacting to the Supreme Court judgement Uninor, which has launched services in most of the circles, expressed shock and said that the company has been treated unfairly.

"We have been unfairly treated as we simply followed the government process we were asked to. We are shocked to see that Uninor is being penalised for faults the court has found in the government process," the company statement said.

Noting that the order has not stopped the company operations for now Uninor said "we expect the authorities to ensure that our 36 million customers, 17,500 workforce and 22,000 partners are not unjustly affected."

Other new operators said that they would examine the order before commenting on the future course of action.

Trial court to decide on Chidambaram's role in 2G

The Supreme Court on Thursday said the trial court will decide on Janata Party chief Subramanian Swamy's plea to make home minister Chidambaram a co-accused in the 2G spectrum allotment case, IANS reported. The apex court said that the trial court should decide the matter within two weeks. Special CBI Judge O P Saini, who is hearing a separate petition of Swamy to prosecute Chidambaram, has already reserved his order for February 4.

The Supreme Court on Thursday asked the CBI to file status reports on its ongoing probe into the 2G spectrum allocation case to the Central Vigilance Commission (CVC).

The court's decision came on a plea for setting up a Special Investigation Team (SIT) to look into the 2G case, the bench asked CBI to submit status reports on further investigation into the matter to the CVC which will assist the court.

The bench asked CBI to submit status reports on further investigation into the case to the CVC which will assist the court.

Hailing the order, Swamy said the court's direction is a "de facto SIT".

We can be proud of Supreme Court: Swamy after 2G order

Janta Party leader Subramanian Swamy on Thursday welcomed the Supreme Court order cancelling 122 licences granted to telecom companies during the tenure of former communications minister A Raja.

The country was proud of its Supreme Court, Swamy -- who had filed the original petition before the apex court -- told reporters after the landmark order.

"This is the best judgment which could come... the country can be justifiably proud of the Supreme Court," Swamy, who had filed a petition in the Supreme Court, said.

Licences to remain in place for 4 months

Licences held by five companies including the local joint ventures of Norway's Telenor and Abu Dhabi's Etisalat were cancelled in the verdict, calling into question the stability of business contracts and regulation in India, Reuters reported.

The Supreme Court ruling said the current licences will remain in place for four months, in which time the government should decide fresh norms for issuing licences, a lawyer involved in the case said.

India's image as an investment destination was dented over the past year as the economy slowed, government reforms stalled and the telecoms scandals along with other high profile graft cases heightened concerns about government policies.

Telenor has about 36 million subscribers in India and Etisalat has fewer, making them small players in a market dominated by Bharti Airtel, Vodafone and Reliance Communications.

The telecoms scandal is the biggest of several that have emerged during Prime Minister Manmohan Singh's second term and has weakened him. Two ministers, including former telecom minister Andimuthu Raja, who presided over the 2008 grant process, have resigned. Raja is in jail pending trial.